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  • #16
    Think about these three things
    • COVID impact on the market
    • # of years you will keep the house
    • interest rate
    Put all three of these things into your decision.
    Things to Consider
    If you average the mortgage interest rates from the past 48 years you will see that the average mortgage rate is 8.07%.
    Compare that rate to today's COVID era rates that can be under 3%.
    Historic appreciation rate is around 3.7% (average appreciation over the last 50 years)

    It's super important to keep the house for 5-10 years. Why? Because you don't want to get swallowed up in a down economy. Don't sell into a downturn. Instead, keep the house and get an average appreciation of 3.7%.

    Think about this:
    Lets pretend you buy a $400K house today at a 3% interest rate. Your Principle & Interest payment will be $1,602. Home Value after 10 years at 3.7% appreciation = $575K
    Wait a few years until prices go down 20% (and that may never happen) and the rate goes up to 6% (That will almost assuredly happen). Your Principle & Interest payment will be $1,822. Home Value after 10 years at 3.7% appreciation = $460K

    You would have saved over $25K in payment by jumping on the current crazy low-interest rates.

    Of course, you probably would have tormented yourself watching values go up and down over the years.

    Try not to do that. Don't get tunnel vision.

    Try to remember that your home is likely (based on over 50 years of historical data) to appreciate at an average of 3.7% per year.

    Don't get too excited if you have a year when values soar by 17%.

    Don't get too bummed if values go down by 9% in a down economy (remember 2004-2008; what goes up too high will come down).

    Picture this: you fall into a deep sleep in the year 2002 and don't wake up until 2020. You missed out on the emotional rollercoaster of home values going up and down. You missed out on the housing bubble. You missed out on interest rates moving all over the place. You wake up in 2020. You grab your calculator. You look at what you paid for your house. You look at what it is worth today. You stretch, yawn, and relax knowing that your home,e appreciated at about 3-4% per year while you were napping.

    This is a great time to buy a home if you need a loan to do it.

    Owning a home provides the stability that a wife and kids crave, and moving from rental to rental erodes it.

    I would recommend buying less house than you qualify for. That way you will have money that you can save that would have gone towards mortgage. Use that extra money to pound away at those student loans. Figure out how quickly you can pay off the student loans if you pay an additional, realistic, additional chunk towards your debt every month.

    You can do this. Do it smart and you'll be glad you did if homes continue to appreciate at historic average rates.